Australia’s Biggest Banks Split Over RBA’s Oct. 2 Rate Move

Australia’s four biggest lenders are divided over whether Reserve Bank Governor Glenn Stevens and his board will resume reductions next week in the highest benchmark interest rate among major developed nations. Photographer: Sergio Dionisio/Bloomberg

Sept. 26 (Bloomberg) -- Australia’s four biggest lenders
are divided over whether Reserve Bank Governor Glenn Stevens and
his board will resume reductions next week in the highest
benchmark interest rate among major developed nations.

Westpac Banking Corp. Chief Economist Bill Evans and Warren
Hogan of Australia & New Zealand Banking Group Ltd. are in the
minority predicting policy makers will cut by a quarter
percentage point to 3.25 percent at the Oct. 2 meeting, a
Bloomberg News survey showed. Commonwealth Bank of Australia and
National Australia Bank Ltd. are among 19 of 26 economists
forecasting a fourth straight monthly pause at 3.5 percent.

“While the more dovish tone of recent RBA pronouncements
makes a cut as early as next month quite possible, our judgment
is that they will wait a little longer,” NAB Chief Economist
Alan Oster said in a Sept. 24 research report. “Commodity
prices are higher, including iron ore, the NAB business survey
improved somewhat in August, the unemployment rate is lower,
we’ve seen a positive response from asset markets to monetary
easing right across the U.S., Europe, and Japan, and against all
this the Australian dollar is basically unchanged.”

The local currency, trading 30 U.S. cents higher than its
average since exchange controls were scrapped in 1983, has
gained 1.4 percent since the RBA’s Sept. 4 meeting.

Rate Bets

The survey results contrast with investors who have priced
in about an 80 percent chance the RBA will lower the overnight
cash rate target by a quarter point next week, according to
swaps trading data compiled by Bloomberg.

A slowdown in mining that helped secure 21 recession-free
years in Australia has heightened the focus on risks to an
economy where consumers have taken on more debt than Americans
at the height of the mortgage bubble. Policy makers have
signaled confidence they have the tools to cope with any
external turbulence -- with room to reduce rates and loosen
fiscal policy that is unavailable to most major economies in the
developed world.

A government report today showed an Internet job vacancy
index for Australia fell 2.9 percent in August from a month
earlier, marking the longest stretch of monthly declines in data
compiled by Bloomberg since 2006.

The unemployment rate in Australia has hovered near 5
percent for the past 15 months.